The random thoughts of an Australian economist and author, who has seen much of the world and wants to change it.

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Duty-Free Liquor Prices

I’m in Armenia, the land of fine brandy. At the supermarket today I saw a half-litre bottle of Grant’s whisky for the equivalent of US$9.38. That’s US$14.07 for a standard 750ml bottle. The Armenian Government whacks on import duty (10%), excise tax (30%) and VAT (20%) and I suspect that the supermarket still manages to make a profit. But that fully-taxed retail price beats the typical price in any airport duty-free shop that I know of.

It does not come as a surprise that duty-free shops make mega-super-profits, but can anyone tell me where they go? Are governments creaming off a tax under another name? How much goes to the airport owners? Is the whole duty-free racket a way to give backdoor subsidies to the civil aviation industry? This would be consistent with the airlines’ exemption from tax on the fuel they burn and the tickets they sell.